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Illustration: Lazaro Gamio / Axios

If CVS makes a formal offer to buy Aetna, it will represent an attempt to stave off any future drug supply chain competition from Amazon and fight the growing incumbent power of UnitedHealth Group.

Between the lines: The CVS-Aetna merger is "more defensive than offensive," Leerink Partners analyst Ana Gupte told investors.

The Amazon angle: Amazon's potential entry into drug distribution spurred CVS to consider acquiring Aetna, the Wall Street Journal reported.

  • CVS previously expressed concerns about Amazon as well as confidence it still had the edge.
  • "Amazon's a respected competitor. You don't take anything lightly that they may be doing. That said, pharmacy is not a commodity business...it's a highly regulated industry," CVS CEO Larry Merlo said at a May industry conference.
  • CVS is more than just its pharmacy stores. Its biggest business is its role as a pharmacy benefit manager, which negotiates drug prices and creates lists of covered drugs for employers and insurers.
  • Operating pharmacies and being a pharmacy benefit manager are a lot more complicated than selling and shipping consumer goods. Acquiring another highly regulated business, like Aetna and its health insurance products, would create more distance between CVS and Amazon.

The UnitedHealth angle: CVS also approached UnitedHealth about merging, the Wall Street Journal reported. It's easy to see why.

  • UnitedHealth's integrated model — being a large health insurer, pharmacy benefit manager and provider under one roof — has served as the health care blueprint for larger growth and gigantic earnings.
  • UnitedHealth's pharmacy benefit manager, OptumRx, has won many big contracts over CVS.
  • There likely would be more antitrust issues by merging with UnitedHealth, but creating a bigger competitor is CVS' next best option.

Go deeper

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The coronavirus variants: What you need to know

Illustration: Aïda Amer/Axios

New variants of the coronavirus circulating globally appear to increase transmission and are being closely monitored by scientists.

Driving the news: The highly contagious variant B.1.1.7 originally detected in the U.K. could become the dominant strain in the U.S. by March if no measures are taken to control the spread of the virus, the Centers for Disease Control and Prevention said Friday.

11 mins ago - World

Abbas announces first Palestinian elections in 15 years

Abbas is 85 and in the 15th year of a 4-year term. Abbas Momani/AFP via Getty

Palestinian President Mahmoud Abbas published a decree on Friday announcing the dates for parliamentary and presidential elections in the Palestinian Authority.

Why it matters: This is the first time in 15 years that such a decree has been published. The last presidential elections took place in 2005, with Abbas winning, and the last parliamentary elections took place in 2006, with Hamas winning.

Updated 17 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: Coronavirus deaths reach 4,000 per day as hospitals remain in crisis mode — America has tuned out the coronavirus at the peak of its destruction — 1 in 3 people in L.A. County believed to have been infected with coronavirus.
  2. Politics: Biden taps ex-FDA chief to lead Operation Warp Speed amid rollout of COVID plan— Widow of GOP congressman-elect who died of COVID-19 will run to fill his seat — Joe Biden will seek nearly $2 trillion in COVID relief spending.
  3. Vaccine: Battling Black mistrust of the vaccines"Pharmacy deserts" could become vaccine deserts — Instacart to give $25 to shoppers who get vaccine.
  4. Economy: Unemployment filings explode againFed chair: No interest rate hike coming any time soon —  Inflation rose more than expected in December.
  5. World: WHO team arrives in China to investigate pandemic origins.